Small cap stocks outperforming large cap in 2014

Small cap stocks across a range of global regions have outperformed their large cap counterparts in 2014.

Led by developed European markets, small cap stocks across a range of global regions have outperformed their large cap counterparts in 2014 as of Jan. 17, continuing a trend set in 2013, according to the report.

Russell Investments discloses this finding in the latest release of The Russell Global Index, a benchmark that measures the performance of the global equity market based on all investable equity securities. The Index includes more than 10,000 securities in 47 countries, and covers 98 percent of the investable global market.

The research also reveals the following:

In Europe, the Russell Developed Europe Small Cap Index returned 4.1 percent year-to-date, double that of the Russell Developed Europe Large Cap Index for the same time period.

In the U.S., the small-cap Russell 2000 Index (2.0 percent) outpaced the large-cap Russell 1000 Index (1.3 percent) year-to-date, after outperforming by more than 5 percent in 2013.

Globally, the Russell Global Small Cap Indexreturned 2.5 percent year-to-date, double that of the Russell Global Large Cap Index for the same time period.

"We continue to see opportunity in small caps in 2014," says Jon Eggins, senior portfolio manager with Russell Investments. "While valuations have become higher with such strong performance in 2013, we now see falling stock level correlations as well as increasing valuation dispersion between stocks.

“These factors appear to underscore the opportunity for active stock pickers in global small caps this year as macroeconomic influences recede and individual stock fundamentals come to the fore."